Global inflation is undercutting demand for Chinese exports, a senior government official said at a Beijing press conference Tuesday.
China’s manufacturing sector saw orders begin to stall in August following a nearly two-year export boom. Covid lockdown orders disrupted production and shipping throughout the year, but the “slowdown in external demand is the biggest uncertainty faced by China’s trade,” said Wang Shouwen, China’s international trade representative and vice minister of commerce.
“Our companies are reporting falling orders, as the demand from major markets is declining,” Wang said. While China trade grew more than 10 percent year over year to $3.8 trillion from January through August, according to data from China’s State Council Information Office (SCIO), annual growth slowed during August to 8.6 percent—a near 8-percent decrease from the growth seen in July, state media reported.
Wang believes things could change in the second half of the year. He pointed to new free trade agreements like the Regional Comprehensive Economic Partnership (RCEP) that will help promote China’s relationships across East Asia and the Pacific. In August, China’s exports to RCEP member countries such as Australia, Brunei, Cambodia, Indonesia, Japan, South Korea, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, Thailand and Vietnam grew 23 percent from the same period a year prior—more than 11 percent higher than the country’s overall growth rate for exports, SCIO said.
The Oct. 15 China Export and Import Fair, also known as the Canton Fair, will expand from 10 days to five months, Premier Li Keqiang announced at a State Council Executive Meeting on Sept. 15. The online exhibition, along with the China International Import Expo, the use of overseas warehouses and cross-border e-commerce represent opportunities for businesses to secure orders in the coming months, Li added.
“With these policy supports and the sound foundation of China’s foreign trade, we are confident that the sector will achieve positive growth in the second half of this year despite slowing external demand,” Wang said. China’s cabinet is ready to lower government-priced cargo port dues by 20 percent in Q4, and has committed to maintain normal operations for ports and freight depots, state media reported earlier this month.
Evidence of a downturn can be seen in falling shipping prices. Drewry reported Sept. 22 that the spot shipping rate for a 40-foot container traveling from Shanghai to Los Angeles fell 11 percent, or $473, from the week prior to $3,779. The decline represents a 70-percent change from the same period last year, and it’s the first time spot pricing for the route has dipped below $4,000 since September 2020. The container spot rate for the Shanghai-to-New York route fell 9 percent from the week prior to $7,701, 51 percent below the year-ago period. Drewry said it expects the index to continue to decrease in the coming weeks.
Meanwhile, U.S. retail sales rose 0.3 percent in August to $683.3 billion, with inflation likely behind the increase. Wells Fargo economists noted decreases across five out of 13 spending categories last month, which they said suggests that the “staying power of consumer spending is waning.”